Trucking costs may see some major increases in the next 5 years

Just about every package or crate shipped in the US is transported in a truck, at least for part of its shipping journey. It would be hard to argue with the statement that trucking is the backbone of the US economy. The industry is comprised of a myriad of small and large companies and independent truckers. There are a number of forces at work that could potentially affect shipping costs and transit times over the next 5 years.

Government Regulation: The Tracy Morgan accident has put the spot light on safety in the trucking industry. Congress has taken notice and there are a number of regulations on the docket for 2015 that involve trucker rest breaks, driving hours and technology. See post on “Tracy Morgan Accident puts spotlight on trucker driver fatigue”. While it is uncertain which exact legislation will be passed, many in the trucking industry believe that it will increase shipping costs with very little added benefit. Additionally, transit times could increase because of these regulations. Added regulation may be a necessary evil to help improve safety, but it appears that costs could also increase.

Transportation Funding Legislation: The US needs to fund its transportation infrastructure. While there is little disagreement in congress that funding needs to happen, there is a lot of debate concerning the funding mechanism. A recent initiative by the administration is the “Grow America Act”, an ambitious program to revitalize the US transportation infrastructure. One aspect of this proposed legislation is the increase in tolling as the primary funding mechanism. The trucking industry is against tolling, as ATF spokesman Miles Morin has stated: “tolling existing interstates is inefficient causing traffic diversions and added supply chain costs”. Others have observed that while the railroad industry will greatly benefit from this act, it is the trucking industry that will get the brunt of the taxes. It is still uncertain what ultimate long term legislation will replace the expired highway trust fund established by the Map-21 bill. The impact of the legislation could potentially increase trucking costs.

Truck Driver Shortage: There is a significant shortage of truck drivers and with existing drivers retiring, it is becoming more acute. This shortage trend has been evident for over a decade, but the 2008 recession saw a significant drop in trucking demand, so there has been very little focus on the issue until recently. With the US economy starting to recover, the labor shortage is becoming a bigger issue. According to a recent article in cnbc.com, “Keep on truckin’? Inside the shortage of truck drivers”, there are currently 30,000 to 35,000 unfilled truck driver jobs. The problem is getting worse as the number of new drivers entering the market place is not keeping pace with the older drivers entering retirement. For the long term, there are some potential solutions to the issue:

More use of railways: Unfortunately the railway system needs some major overhaul before becoming a viable option to replace some trucking. Even if congress agreed to some major funding, we are years away from completion.

Technology: There are a number of emerging technologies that may make driving more attractive to the younger worker or even reduce the number of drivers needed. Driverless technology is being touted as a logical solution for at least some parts of trucking. For example, long distance hauling over less traveled roads could be done by driverless systems with human drivers taking over when the truck is moving through densely populated areas. While technology is changing at an exponential rate, it is doubtful that driverless technology will be a viable solution in the next 5 years.

Over the next 3-5 years, the only viable option will be to make trucking more attractive to workers. That will probably translate to significantly higher wages and benefits for truckers. The more desperate the industry is to fill positions, the higher the wages, less hours and more benefits. All this, at least for the short term could translate to higher shipping costs.